The outsourcing trend of embracing disruptive technologies remains. However, the fallout from COVID-19 is signaling a return to basics: shoring up value and driving down costs, with a renewed focus on risk management. Our latest Global Outsourcing Survey report offers a glimpse into how the latest outsourcing strategies are reshaping the industry and affecting both providers and clients.
For more than a decade, our biennial survey has been the cornerstone of our outsourcing market research. This year, we took a more intimate approach. Instead of releasing a broad online survey to generate outsourcing statistics, we interviewed 40 client executives, service providers, and lawyers to bring a more qualitative perspective to our findings. Respondents are spread across the globe, giving us a more complete view of the outsourcing ecosystem. The interviews were conducted before and after the start of the COVID-19 pandemic, enabling us to identify how industry leaders have responded and where they plan to go.
Cost reduction is back on top. In the past, many players in the industry stated that cost reduction is an ancillary benefit to objectives like increasing agility or improving the quality of service. This year’s survey shows a sharp increase in the number of organizations giving priority to cost reduction, and in the face of a pandemic-induced global recession, this outsourcing trend will only gain traction.
Cloud and robotic process automation (RPA) are table stakes. It’s no surprise to see cloud and RPA solutions becoming a core component of most new outsourcing strategies and transactions. In fact, as they become more proven and familiar, they’re less of a transformative driver than two years ago and are now effectively table stakes for all transformations. Organizations are looking forward to the next major technology catalyst to power the evolution of their business.
Supplier management is underpowered. Third-party ecosystems are more complex than ever, which has implications for regulatory compliance, security, risk, and data protection requirements. Organizations have rising expectations that service providers will spearhead their innovation agenda. COVID-19 put a severe strain on organizations’ supply chains. All these changing dynamics have made supplier management more critical than ever. However, this function is still underpowered in most organizations. Clients need to invest more in building their supplier management capabilities to manage the new normal and achieve maximum value from their service provider ecosystem.
Agility is critical. Changing business scenarios, heightened visa restrictions, and increasing customer expectations are all creating an imperative for service providers to become more agile. Firms will now accelerate overall outsourcing as they learn to collaborate in a world where speed, quality, flexibility, and cost are more important than geography. To stay ahead, service providers will need to rethink how they provide effective remote services, build plug-and-play solutions that enable rapid integration, and have contracts that allow them to pivot as the business priorities evolve.
Lessons learned from the latest outsourcing trends
Preparing for the postpandemic world
From our own insights and interviews, we anticipate the following three changes will take shape across the outsourcing industry:
Outsourcing remains an essential tool for client organizations to support their strategic goals. Requirements constantly evolve, and the industry continues to build support with both established and new solutions. As always, for both parties to benefit in an outsourcing relationship, it requires a client’s preparedness to invest and a service provider’s willingness to embrace flexibility. Overall, outsourcing decisions will play a significantly more strategic role in short-term resilience and long-term growth.